Anti-Tea Party Web Site Part of Scheme to Funnel Funds

A seemingly grassroots organization that's mounted an online campaign to counter the tea party movement is actually the front end of an elaborate scheme that funnels funds -- including sizable labor union contributions -- through the offices of a prominent Democratic party lawyer.

A Web site popped up in January dedicated to preventing the tea party's "radical" and "dangerous" ideas from "gaining legislative traction," targeting GOP candidates in Illinois for the firing squad.

"This movement is a fad," proclaims TheTeaPartyIsOver.org, which was established by the American Public Policy Center (APPC), a D.C.-based campaign shop that few people have ever heard of.

But a close look reveals the APPC's place in a complex network of money flowing from the mountainous coffers of the country's biggest labor unions into political slush funds for Democratic activists.

Here's how it works: What appears like a local groundswell is in fact the creation of two men -- Craig Varoga and George Rakis, Democratic Party strategists who have set up a number of so-called 527 groups, the non-profit election organizations that hammer on contentious issues (think Swift Boats, for example).

Varoga and Rakis keep a central mailing address in Washington, pulling in soft money contributions from unions and other well-padded sources to engage in what amounts to a legal laundering system. The money -- tens of millions of dollars -- gets circulated around to different states by the 527s, which pay for TV ads, Internet campaigns and lobbyist salaries, all while keeping the hands of the unions clean -- for the most part.

The system helps hide the true sources of funding, giving the appearance of locally bred opposition in states from Oklahoma to New Jersey, or in the case of the Tea Party Web site, in Illinois.

And this whitewash is entirely legal, say election law experts, who told FoxNews.com that this arrangement more or less the norm in Washington.

"It's not illegal but it is, I think, dishonest on the part of the organizations," said Paul Ryan, a legal counsel at the Campaign Legal Center. "And there's a reason they do it: they know voters don't like outsiders coming in to sway the vote."

Calls and e-mails to the Maryland-based consultant firm Independent Strategies, run by Varoga and Rakis, were not returned.

Outside of that firm, the center of their activity appears to be a single office in Southeast D.C. -- 300 M Street, Suite 1102 -- which plays host to a sprawling political shell game they have established.

Public records show at least seven political shops listed in Suite 1102, most of which are essentially clones of one another, but all of which have offered money -- from measly thousands to game-changing millions -- in state-level elections across the country:

The APPC, which developed the anti-tea party ads, has gotten all of its money for 2010 from Patriot Majority and from Citizens for Progress, which is also called Patriot Majority West.

Patriot Majority West sent them $25,000 in January, and Patriot Majority added another $5,000. The groups, both run by Varoga and Rakis, also swap hundreds of thousands of dollars between themselves, money often buttressed by gifts from Patriot Majority Midwest, seen above as the Oklahoma Freedom Fund.

The confusing naming system is intentional, say election law experts, who generally disapprove of the practice.

"I do take issue with and have long complained about groups that shield particular special interests with innocuous-sounding names like ... 'Americans for America,'" said Ryan. "That type of naming of an organization, I believe, is specifically intended to obscure the true sources of funding of special interest groups behind political activity."

These three Patriot Majority groups also send checks to Independent Strategies, the strategy firm run by Varoga and Rakis. And some of the 527s have sent money to VR Strategies, another firm run in part by and named after Varoga.

The most recent backers of the Patriot Majority and Patriot Majority West, which helped fund the APPC and thus the Tea Party site, form a veritable Who's Who of the country's top labor unions: the Service Employees International Union, Change to Win, the Communications Workers of America, the National Education Association, the Teamsters Union, the United Food & Commercial Workers Union and others besides.

Using this arrangement, Varoga and Rakis are managing what NPR called a "never-ending pot of union money" that they dispense among the 527s they run, which in turn pay for ads in hotly contested election districts.

That means that taxpayer dollars, sent up as union dues, have been going to fund a host of Democratic causes and help quash the tea party movement.

What's more, Varoga and Rakis are not actually present in Suite 1102. That is the office of their lawyer, Joseph Sandler, a longtime general counsel to the Democratic National Committee.

Sandler, whose firm and trust account raked in over $500,000 in Democratic party money in 2009 alone, told Fox News that there was nothing irregular in their setup.

"That's common practice," said Sandler, a renowned expert on election law who served as general counsel to the Democratic National Committee until February 2009, and whose firm, Sandler Reiff & Young, continues to work for both the Democratic party and numerous left-wing 527 groups.

Sandler noted that political committees and groups are often run by multiple people and don't have a central office, but need a place where they can be in ongoing contact with the IRS and other federal agencies that track election funds.

"It's very common for a law firm to give their address ... as the official address for the organization where correspondence can be received," he said.

It has the effect of confusing the ultimate sources of election funding, but also serves an important practical end, say election law experts.

"As a practical matter there's not a huge universe of lawyers in the United States that know political law all that well and most of them are here in D.C., said Ryan, of the Campaign Legal Center. "It's not uncommon for political organizations to be using lawyers in D.C. or starters, even if they're all over the country."

It is not clear whether TheTeaPartyIsOver.org is the start of a larger campaign run by Varoga and Rakis to target tea party activists. Additional attempts to reach Varoga at a California number were unsuccessful. A staffer answering the phone in Varoga's Oakland office last week told FoxNews.com that he was unavailable for comment and hung up.